IPMA. Istanbul World Congress

2424thth IPMA World CongressIPMA World Congresswww.ipma2010.com

Value-Based Metrics for Project Portfolio jManagementCésar Hernández, BA (BSc), Industrial Engineer

11--3 November 2010, Istanbul, Turkey3 November 2010, Istanbul, Turkey

2424thth IPMA World CongressIPMA World Congresswww.ipma2010.comp

• Design from inside-out• Innovative space concept• Value-added services• Smart buildings• Flexible concepts

Systems• Digitization• Connectivity

• Process improvementO i ti l Systems

thinking• Connectivity• Automation• Speed• Knowledge

management

• Organizational structure

• Communication • Knowledge transfer• Change management

Agent Based

Modelling

“New Ways of Working”encapsulate all those activitiespthat influence how, where andwhen we work.

2424thth IPMA World CongressIPMA World Congresswww.ipma2010.comp

Agenda.g

1 Introduction1. Introduction

2. New value-based metrics for PPM. PV2PV

3. Case Study

4 C l i4. Conclusions


Introduction.

p

Project Portfolio Management. Integrated Proccess

SEARCHSEARCHEVALUATIONEVALUATIONEVALUATIONEVALUATIONRANKINGRANKINGSELECTIONSELECTION

STRATEGIC OBJECTIVES

PROJECT PROJECT PORTFOLIO PORTFOLIO

BALANCEBALANCEMONITORINGPMO

VISIONMISSION MANAGEMENT MANAGEMENT

(PPM)(PPM)

MISSION

MULTIPROJECT MANAGEMENT


Introduction.

p

Scope

MPM PPMPPMCONTROL

OrganizationOrganization and and GovernmentGovernment

Riskmanagement

Project Project E al ationE al ation

Project Project Ranking and Ranking and

Project identification Portfolio

BalanceEvaluationEvaluation ggSelectionSelectionand qualifying Balance


Chapter 2

New value-based metrics for PPM. PV2PVPPM. PV2PV


New value-based metrics for PPM. PV2PV

p

Developed Model


New value-based metrics for PPM. PV2PV.

p

Developed Indicators

Project Value to Portfolio Value. Represents the expected economic PV2PV

j p pvalue added by each candidate to the existing portfolio economic value.PV2PV

x% recovery time value Metric to measure the economic valuex% recovery time value. Metric to measure the economic value generation “dymanic” TRV x%



p

Simulation Proccess

Data I t d tiIntroduction

Type of l i ?

ExistingPortfolio

CandidatePortfolio

analysis?

Portfolio V l ti

Individual V l ti

Individual V l ti

Portfolio V l ti Valuation ValuationValuation Valuation

INDICATORS


Chapter 3

Case study


Case Study.

p

To ilustrate the interest of an aggregatedt f li l i i t d f i di id l

yProject Portfolio analysis. Scenary description

portofolio analysis instead of an individualproject evaluation

∑∑∑−

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jjN

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j (h)fe(h)FCFFVEFVE ,*,* ∑∑

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j ahah

k

j

jportfolio FVEFVE1

1

1

k1 )WACC(a)1(

T t l I t t (Y 2009) 290 000 €Total Investments (Year 2009) = 290.000 €Period 2009 2010 2011 2012 2013

Free Cash Flows 53.500 € 64.000 € 122.000 € 164.000 € 44.000 €Financial Expenses 47.000 € 45.250 € 72.200 € 169.050 € 55.900 €

Existing Portfolio

Portfolio Performance

IndicatorsIRR (%) WACC (%) Value (%)

P1 18,12 7 11,12, ,P2 21,66 15 6,66P3 14,4 10,37 4,04



p

Project Portfolio analysis. Scenary descriptionCandidate Projects

I t t 200 000 €Investment: 200.000 €Candidate Economic and Financial data 2010 2011 2012 2013

PA Free Cash Flows 71.000 € 78.000 € 85.000 € 99.000 €Total Financial Flows 44.720 € 43.040 € 41.360 € 159.680 €

PB Free Cash Flows 57.000 € 57.000 € 67.500 € 67.500 €Total Financial Flows 54.200 € 53.150 € 52.100 € 51.050 €

PC Free Cash Flows 64.000 € 71.000 € 78.000 € 85.000 €Total Financial Flows 55.500 € 52.875 € 50.250 € 97.625 €

PD Free Cash Flows 85.000 € 88.500 € 92.000 € 99.000 €Total Financial Flows 48.320 € 46.640 € 44.960 € 163.280 €

Candidate PerformanceCandidate Performance Indicators IRR(%) WACC(%) Project Value (%)

PA 22,54 12,98 9,56PB 9,05 2,1 6,95PC 17 15 9 7 7 45

Candidate Projects

PC 17,15 9,7 7,45PD 28.33 15,04 13,29


Case Study.

p

yProject Portfolio analysis. Results

Candidates PV2PVPortfolio ranking.PV2PV

Individual Valoration Ranking

Candidate A 14442 € 4 2Candidate B 84600 € 1 4Candidate C 60209 € 2 3Candidate D 28426 € 3 1


Chapter 4

Conclusions


Conclusions

p

INDIVIDUAL ANALYSIS Vs PORTFOLIO ANALYSIS

PROBLEM DYNAMIC. MEASUREMENT OF THE IMPACT AND INFLUENCE OF THE PROJECT WACC TO THE PORTFO IO WACCTO THE PORTFOLIO WACC

EFECTIVENESS OF PV2PVEconomic Value

Creation Measurement

Portfolio Impact

EFECTIVENESS OF PV2PV

SCENARY SIMULATION

Individual evaluation


Conclusions

p

A NEW APPROACH. ORGANIZATIONS AS PROJECT PORTFOLIOSPROJECT PORTFOLIOS

Economic Value Creation

Measurement

Portfolio Impact

Individual evaluation

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